Why are the actions of Geron Corporation pounding today – The Motley Fool

What happened

Geron& # 39; s (NASDAQ: GERN) stocks fell by more than 65% in pre-market transactions this morning on large volumes. The actions of biotechnology are collapsing in response to a negative decision on the part of Johnson & Johnson (NYSE: JNJ) regarding the duo's collaboration against blood cancer for the imetelstat, a telomerase inhibitor.

According to the press release, J & J has decided to return the rights to Geron because of "the strategic valuation of the portfolio and the prioritization of the assets of its portfolio". The drug rights will actually go to Geron on September 28, 2018.

So what

Geron's shares have increased more than 200% from their 52 week lows at a time last week, thanks to the belief that J & J would lead imetelstat to advanced testing and possibly buy directly from its collaborator . Obviously, this termination decision eliminates this thesis, forcing Geron to pick up the pieces and rebuild his infrastructure to develop only imetelstat.

Now what

On the positive side, Geron said that he was considering advancing imetelstat in an advanced-stage trial to evaluate the drug in patients with low-risk or intermediate-1 myelodysplastic syndromes who have relapsed or are refractory to treatment previous by an agent stimulating erythropoiesis. This process is expected to start by mid-2019.

Unfortunately, Geron would have decided not to raise additional capital when he had the chance to do so when his share price was north of $ 6. The direct consequence of this action is that Geron will eventually have to raise more funds at depressed stock price levels to embark on the development of Imetelstat. That being said, there may be one or more other names ready to take over. Imetelstat, after all, is now ready for phase 3. Stay tuned.

George Budwell owns shares in Geron and Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson and has the following options: October 2018 short $ 135 calls on Johnson & Johnson. Motley Fool has a disclosure policy.